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Updated over 7 years ago,

User Stats

3
Posts
1
Votes
Craig Masters
  • Columbus, OH
1
Votes |
3
Posts

Do I sell or do I hold now? Great cash flow VS quick profit?

Craig Masters
  • Columbus, OH
Posted

Hey all! Long time reader, hope to start contributing to the community soon. Hoping to get some feedback on my situation, not sure what to do...All these numbers are conservative, I appreciate and understand the 50% expense rule/the true market value of my home. Here's the summary:

Me

I'm 27 years old, living in Columbus Ohio working as a contractor. My heart is in real estate investing, I want to go full time at it sooner than later. I have about $240k cash saved.

House 1

Four years ago I bought a shell of a house for $100k in a transient neighborhood a mile from Ohio State University. $85k balance on mortgage at 3.7%, my PITI is only $750. It's a B- neighborhood, mix of grad students, young professionals, and a family here and there. Relatively low crime, our street specifically is very low in crime. Our street also coveted, it's a dead end and a lot of people in the neighborhood want to live on this block. Over the years I did a complete high end rennovation at the home. If I knew then what I know now, I wouldn't have gone quite so over the top. Marble, hardwood, custom bathrooms and kitchen. New roof, insulation, windows, etc. I was able to do the full rehab for $35K BC of my years in construction/did all the work myself. So, $135k all in. Market value is now conservatively $250k. Likely will go for closer to $300k, this neighborhood is on fire right now. I've occupied for years so won't pay taxes on cap gain. Let's saw after closing costs I'll walk with no less than $150k cash if I sell-$35k in repairs=$115k profit.

House will rent for $2k per month all day long with low vacancy, going high on the expenses could say I cash flow $750/month. Everything is new, thinking will flow much closer to $1000 long term. 

House 2

Just got in lear with purchase option contract on my next property, it's a really well maintained 10 cap in very nice neighborhood. Super solid house, would yield 10 cap/ 20% cash on cash right away if I rented out in full but plan is to just break even while occupying with air bnb/renting a room. Financials are great on this house long term, not so much looking for advice on this one but some details are important for the big picture. Purchase price $229k.

Questions

So, never thought I'd sell house 1 because it is such a great rental. But over $100k in cash to go invest with sure is tempting. Ultimately, this post is about seeking feedback on Selling house 1 vs Renting house 1.

A few important details, rent house 1 I am putting all my cash into house 2. My debt to income will not allow me to get an additional mortgage on house two. So, until house 1 is seasoned with tenants I would have all my cash tied up in house 2. 

Options:

1. Sell house 1, reinvest that cash and get a mortgage on house two. Would leave me with a lot of cash to go invest more aggressively. 

2. Rent house 1, pay cash for house 2, and refinance house two next year when I can get DTI order. Will be cash strapped in the meantime.


What's your vote/outlook?

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